AIRLINK 62.48 Increased By ▲ 2.05 (3.39%)
BOP 5.36 Increased By ▲ 0.01 (0.19%)
CNERGY 4.58 Decreased By ▼ -0.02 (-0.43%)
DFML 15.50 Increased By ▲ 0.66 (4.45%)
DGKC 66.40 Increased By ▲ 1.60 (2.47%)
FCCL 17.59 Increased By ▲ 0.73 (4.33%)
FFBL 27.70 Increased By ▲ 2.95 (11.92%)
FFL 9.27 Increased By ▲ 0.21 (2.32%)
GGL 10.06 Increased By ▲ 0.10 (1%)
HBL 105.70 Increased By ▲ 1.49 (1.43%)
HUBC 122.30 Increased By ▲ 4.78 (4.07%)
HUMNL 6.60 Increased By ▲ 0.06 (0.92%)
KEL 4.50 Decreased By ▼ -0.05 (-1.1%)
KOSM 4.48 Decreased By ▼ -0.09 (-1.97%)
MLCF 36.20 Increased By ▲ 0.79 (2.23%)
OGDC 122.92 Increased By ▲ 0.53 (0.43%)
PAEL 23.00 Increased By ▲ 1.09 (4.97%)
PIAA 29.34 Increased By ▲ 2.05 (7.51%)
PIBTL 5.80 Decreased By ▼ -0.14 (-2.36%)
PPL 107.50 Increased By ▲ 0.13 (0.12%)
PRL 27.25 Increased By ▲ 0.74 (2.79%)
PTC 18.07 Increased By ▲ 1.97 (12.24%)
SEARL 53.00 Decreased By ▼ -0.63 (-1.17%)
SNGP 63.21 Increased By ▲ 2.01 (3.28%)
SSGC 10.80 Increased By ▲ 0.05 (0.47%)
TELE 9.20 Increased By ▲ 0.71 (8.36%)
TPLP 11.44 Increased By ▲ 0.86 (8.13%)
TRG 70.86 Increased By ▲ 0.95 (1.36%)
UNITY 23.62 Increased By ▲ 0.11 (0.47%)
WTL 1.28 No Change ▼ 0.00 (0%)
BR100 6,944 Increased By 65.8 (0.96%)
BR30 22,827 Increased By 258.6 (1.15%)
KSE100 67,142 Increased By 594.3 (0.89%)
KSE30 22,090 Increased By 175.1 (0.8%)

Just 9 months ago, rice was marketed as the cereal that would save the planet. As war broke out in the Black Sea, fertilizer prices spurt out of control, and wheat harvests failed across the globe, world rice production remained unaffected, restraining fears of global food insecurity and hunger. Pakistani policymakers breathe a sigh of relief, as a substantial surplus in rice production could help mitigate two of their worst fears: a grain/cereal shortage in the local market; and, a widening trade deficit. Unfortunately, that hope could prove short-lived.

First, came the floods. The horrific monsoon rains destroyed Sindh’s coarse rice crop, which in the past has contributed up to 80 percent of Pakistan’s rice export by volume, and 75 percent by value. Pakistan’s annual rice production has now been written down by at least 3 million metric tons (MMT), down from 9.3MMT achieved last year. During 5MFY23, coarse rice exports are down by 5 percent in volume, and 9 percent in value, even as residual exports fetched the highest unit prices in nearly a decade.

Since then, luck has only taken a turn for the worse. Global rice production forecast has been lowered by 12 percent, as output in India dropped by a whopping 6MMT. As the world’s largest rice exporter imposed duties and tariffs on the export stage – particularly on broken rice and other coarse rice varieties – global prices have picked up, further tightening world supply. Unfortunately, Pakistani exporters are in no position to gain from the situation.

The story of basmati export is even berserk. Basmati prices in the international market have risen by more than half – 56 percent between Nov 2021 and 2022. Yet, it seems a grain shortfall in the local market coupled with tightening supplies due to lower cultivated area has resulted in weaker exports – which are 29 percent lower in volume terms during 5MFY23 compared to the same period last year. This more than offset the gains on unit prices, with an overall 11 percent drop in basmati export revenue during the period under review.

Although the exporting industry is hopeful that things shall pick up in the latter half of the fiscal year, don’t pin your hopes on it. After the wiping out of coarse rice surplus from Sindh, the record-shattering export target achieved during the last fiscal is now a distant dream. Higher basmati prices could stem the tide of falling export revenue, but the quantity exported of basmati would have to rise by at least 50 percent – from 0.75MMT in FY22 to 1.15MMT in FY23 – for annual rice export receipts to reach the $2.5 billion goal.

Two push factors may alleviate the export situation. First, premium basmati prices in the local market have skyrocketed over the last two months. If demand shows significant price elasticity, expect more supplies to become available for export. Two, inventory financing trends raises the possibility that procurement by milling segment may be keeping up pace with last year, even though bank lending rates have basically doubled between Nov 2021 and 2022. Of course, an alternative explanation could be that mills are paying through their noses for a smaller crop. Only market insiders can explain!

Either way, if you were a Pakistani rice farmer with a healthy crop yield during the outgoing Kharif 2022 season – most likely located in the northeast or central Punjab, congratulations on a year of excellent profitability!

Comments

Comments are closed.